Legislative Update: Proposed SEA 1 Fixes and Senate Bill 238

Legislative Update: Proposed SEA 1 Fixes and Senate Bill 238

MISHAWAKA, IN — As the 2026 Indiana General Assembly session progresses, state lawmakers are actively considering proposals to adjust the implementation of Senate Enrolled Act 1 (SEA 1) — the major property tax and local income tax reform law passed last year. These proposed changes are intended to address significant concerns raised by local governments, including Mishawaka, about the fiscal implications of the new tax structure.

One of the primary legislative vehicles being advanced is Senate Bill 238 (SB 238), authored by Senator Linda Rogers (R-Granger) and co-authored by Senator Blake Doriot. SB 238 is designed to refine and delay aspects of the local income tax (LIT) changes originally included in SEA 1, giving cities and towns greater predictability and flexibility as they plan for the future.

What SB 238 Would Do

SB 238 includes several proposed adjustments to how SEA 1’s local tax reforms will work:

• Delay the effective date of key LIT changes from 2028 to 2029, providing extra time for local planning and implementation.

• Remove the requirement that counties and municipalities must readopt their LIT rates each year, reducing procedural risk and potential revenue volatility.

• Adjust population thresholds that determine municipal eligibility to adopt local LIT rates, potentially expanding opportunities for more cities and towns to access local income tax authority.

• Amend various LIT rate structures and thresholds, restoring some flexibility and reinstating certain appeal provisions that were repealed under SEA 1.

These provisions are aimed at giving municipal leaders greater confidence to budget long term, invest in infrastructure, and maintain essential services without undue uncertainty.

Current Status

SB 238 was introduced in the Senate on January 8, 2026, and has been referred to the Senate Tax and Fiscal Policy Committee for consideration. The bill remains in committee as lawmakers continue engaging stakeholders and refining language before a potential committee vote.

Local government associations, including the Association of Indiana Municipalities (AIM), have made adjustments to the LIT structure a top legislative priority for 2026, and most of AIM’s proposals are included in SB 238. AIM’s advocacy reflects widespread concern that SEA 1’s current implementation could create a “fiscal cliff,” making it harder for municipalities to plan and fund services reliably.

What It Could Mean for Mishawaka

If passed, SB 238 would help stabilize local government revenues and planning efforts that were complicated by the structural changes in SEA 1. For Mishawaka, this could mean:

• Greater predictability in the City’s long-term financial planning, especially for capital projects and operating budgets.

• Reduced procedural risk related to annual rate readoption, which could unintentionally disrupt municipal revenue if deadlines are missed.

• More flexibility in how local income tax authority is used to support essential services, including public safety, roads, parks, and utilities.

By addressing structural concerns in SEA 1 while preserving the law’s broader reform goals, SB 238 seeks to balance statewide tax reform with local fiscal stability.

Next Steps

Observers will continue to monitor SB 238 as it moves through committee and, potentially, onto the Senate and House floors later this session. The City of Mishawaka will continue to advocate for legislative outcomes that support sustainable local governance and responsible service delivery.

How Residents Can Engage

Mishawaka residents who want to support these proposed fixes can make their voices heard by contacting their state legislators, particularly members of the Senate Tax and Fiscal Policy Committee, and expressing support for SB 238. Sharing how stable, predictable funding helps maintain local services—such as public safety, street maintenance, and infrastructure investment—reinforces why these adjustments matter at the community level. Residents may also follow updates through trusted municipal organizations like AIM and stay engaged as the bill advances through the legislative process.